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In decision awarding fees to attorneys challenging Atlantic Yards timetable, judge slams ESDC, suggests arena might not have been started/built had agency come clean

A new legal decision casts another cloud over the behavior of the state agency shepherding/overseeing Atlantic Yards and hints that only thanks to cheating did the Barclays Center get started in 2010 and, perhaps, built at all.

In the decision, dated 9/20/13 but released yesterday, state Supreme Court Justice Marcy Friedman granted a yet-to-be-determined amount of attorneys' fees to the two community coalitions that successfully challenged the Empire State Development Corporation's (ESDC) agreement to extend the Atlantic Yards timetable from ten years to 25 years without studying the community impacts.

The practical impact--should the decision not be successfully appealed--is that attorneys for two community coalitions, Develop Don't Destroy Brooklyn (DDDB) and BrooklynSpeaks, may get paid for a significant amount of their work so far.

Also, there may be money left over to fund additional legal work regarding the ongoing Supplemental Environmental Impact Statement (SEIS) regarding the project's second phase and/or other aspects of Atlantic Yards. While both organizations offered comments regarding the SEIS, they have been quiet in the past year, with DDDB nearly dormant.

Pointed judicial comments

In her ruling (below), Friedman also made several pointed comments about the overall case, notably slamming the state's "audacity" in claiming it was reasonable to focus on the impacts of a ten-year buildout.

The judge suggested that the petitioners "persuasively" argued that the process for an SEIS should consider alternatives beyond Forest City Ratner's project to alleviate blight and "create affordable and market-rate housing with less adverse environmental impacts." (They've suggested that the Phase 2 sites be bid out to multiple developer.) And she hinted that everything might have been different had the ESDC come clean in early 2010.

That timetable switch was revealed in a Development Agreement the ESDC quietly signed with developer Forest City Ratner at the end of 2009, after the agency publicly re-approved the project. Lawsuits were then filed, and consolidated, challenging the approval and the failure to study an extended buildout.

But the Development Agreement was not released until after Friedman held an initial hearing in the case in January 2010. After initially ruling against the community groups in March 2010, just before the arena groundbreaking, Friedman reopened the case. In July 2011, she ruled against the ESDC and developer Forest City Ratner regarding Phase 2, but said the first phase was too far along to stop.

Friedman ordered an SEIS to evaluate the community impacts of Phase 2, The process is ongoing, with a Draft SEIS yet to be issued.

Winning side: "further vindication"

As I wrote last December after the oral argument, Friedman was distinctly unreceptive to ESDC attorney Philip Karmel, leaving reason for optimism on the part of those seeking to be paid.

"We're pleased it's a further vindication of what we've been arguing," DDDB attorney Jeff Baker commented late last night, citing Friedman's "audacity" quote and adding that it was "quite telling" that the judge acknowledged she might have looked differently at the case had the Development Agreement been revealed.

DDDB elaborated in a statement this morning:
"Justice Friedman's ruling today is another reminder of the sordid 10-year history of the Atlantic Yards project, which to this day has largely failed to deliver on the promises that were used to sell it to the people of New York," said Candace Carponter, Develop Don't Destroy Brooklyn's legal director.  "We're gratified by today's decision, but the fact remains that, as Justice Friedman suggests, had the ESDC and Forest City Ratner not knowingly misrepresented the facts to the court, the entire Atlantic Yards project, including the heavily subsidized Barclays Center, would never have gotten off the drawing board."
"Justice Friedman has rendered a strong decision that vindicates what the community has been saying for a long time.  One can only wonder whether this project would have ever moved forward if, as Justice Friedman noted, ESDC had disclosed the project's true timeline", said Jeffrey S. Baker, lead attorney for Develop Don't Destroy Brooklyn and a partner in Young, Sommer LLC.  "It is time for ESDC to finally engage in an open and honest process that considers the full range of alternatives for Phase II of this project, not just the interests of Forest City Ratner."
Al Butzel, an attorney for BrooklynSpeaks, didn't comment yesterday, [updated] but BrooklynSpeaks issued a press release:
Civic leaders and advocates renewed calls for better government oversight of Atlantic Yards. “It’s outrageous that after more than two years, ESDC has yet to comply with a court order for a supplemental environmental impact statement,” said Ellen Fishman, chair of the Prospect Heights Neighborhood Council. “Justice Friedman again confirmed the need for just such a study of alternatives that can deliver housing without the need for extended construction.”
“Atlantic Yards delays are costing local families their chance to live in an apartment they can afford,” said Michelle de la Uz, executive director of the Fifth Avenue Committee. “Yesterday’s decision is another reminder that ESDC has long held the veil shrouding Atlantic Yards from accountability to the public, and that must change.”
Elected officials noted the recent announcement by FCRC of its intention to sell a majority of its interest in the residential portion of the Atlantic Yards project. “The massive delays in producing affordable housing are intolerable,” said Assemblyman Jim Brennan, chair of the Assembly Committee on Corporations, Authorities and Commissions. “I call on ESDC and Forest City Ratner to accelerate the schedule to bring the affordable housing units to completion as soon as possible.”
Said Assemblyman Walter Mosley, whose 57th District includes nearly all of the Atlantic Yards site, “Yesterday’s decision by the Court puts a greater burden on ESDC to demonstrate transparency in its future dealings on this project, into which the public has already directly invested hundreds of millions of dollars.”
“The Court has acknowledged what many of my constituents have known all along—that an agency of the State of New York has failed, and continues to fail, to represent their interests in favor of those of a powerful corporate developer,” said Councilmember Letitia James, who represents the neighborhoods of Fort Greene, Prospect Heights, Clinton Hill and Crown Heights. “ESDC needs to bring fundamental change to the oversight of this project to ensure public benefits get delivered before private profit.”
(The attorneys sought about $300,000 in fees; Friedman ordered that a special referee evaluate the request.)

Representatives of the ESDC and Forest City Ratner offered "no comment." So it's not clear if they'll try to appeal; a loss would further add to the cost of the legal defense, which is funded by the developer.

Alternate history: no/delayed arena

In her decision, Friedman left the tantalizing possibility that, had the ESDC come clean in early 2010, she might have stalled arena construction:
Had the ESDC disclosed the terms of the Development Agreement that were being negotiated when the petitions were initially heard, or brought the Agreement to the court’s attention promptly after it was executed, construction would not have been as advanced on the arena at the time of the court’s determination requiring an SEIS, and the balance of the equities may have favored a stay pending preparation of the SEIS.
And that SEIS could have jeopardized arena financing and thus the Barclays Center itself.

Not only did the ESDC not disclose the Development Agreement, when Baker tried to bring it to Friedman's attention, the judge initially would not allow it into the record, and later acknowledged a misapprehension--though not quite a mistake-- on her part.

At issue: EAJA and ESDC as state agency

The Equal Access for Justice Act (EAJA) provides that fees and other expenses to the prevailing party "in any civil action brought against the state, unless the court finds that the position of the state was substantially justified or that special circumstances make an award unjust."

In her decision, Friedman noted that there's no case law on whether the ESDC "is the state or a state agency for purposes of the EAJA."

In her analysis, Friedman held "that the ESDC, in its role as lead agent for SEQRA[State Environmental Quality Review Act] in the Atlantic Yards Project, is an agency of the state... The legislative history of the establishment of the Urban Development Corp. (UDC), which is a public benefit corporation that does business as the ESDC, leaves no doubt that the purpose for which the UDC was established was to make grants and loans to promote economic development."
She agreed that when the ESDC acts to finance and promote economic development, it's not acting as the state:
Here, in contrast, the ESDC was not performing fiscal functions to promote economic development, as to which it required “freedom and flexibility” from requirements imposed on other state agencies that would interfere with the accomplishment of those functions.  Rather, it was acting as lead agent for SEQRA review of the Atlantic Yards Project, and thus performing a “fundamentally governmental” function as a decision-maker.
...In sum, as lead agent for SEQRA, the ESDC was charged with discretionary decisionmaking power, was acting to enforce and ensure compliance with State law, and was subject to judicial review according to the standards applicable to governmental agencies generally.
Prevailing party

The EAJA defines a “prevailing party” as a “plaintiff or petitioner in the civil action against the state who prevails in whole or in substantial part where such party and the state prevail upon separate issues.”

During the oral argument, Forest City Ratner attorney Jeffrey Braun noted that attorneys' fees are supposed to go to the "prevailing party. You have to have won most of the case."

"This case was not brought about a Supplemental EIS," he observed. "It was brought to stop the project." He suggested an offset of fees his client and ESDC expended "to prevent them from stopping the project."

Indeed, the initial lawsuit had three main causes of action, two of which could have stopped the project, so Braun was correct--but with an asterisk.

Had the Development Agreement been part of the record for Friedman's first ruling, before the groundbreaking, her ruling might have significantly affected the project, if not stopped it.

Friedman noted that "petitioners prevailed on their SEQRA claim for further environmental review of Phase I1 of the Project, involving the 'substantial majority' of residential buildings to be constructed."

Some other claims, she noted, were secondary to the primary SEQRA claim, and dismissed with limited discussion. As for the requested environmental review and a stay of construction of Phase 1, Friedman then it was too far along at the time of her ruling--but had the ESDC come clean, it might not have. 

She added:
Under these circumstances in which the ESDC’s own conduct delayed resolution of the SEQRA claim while construction proceeded, the court does not find that petitioners’ failure to obtain injunctive relief precludes a finding that they are prevailing parties.
Substantial justification

The prevailing party can't get attorneys' fees if the court "finds that the position of the state was substantially justified or that special circumstances make an award unjust."

Friedman wrote:
The ESDC claims that it had a reasonable basis for, although it did not prevail on, its position that its use of a 10 year build-out in assessing environmental impacts of the 2009 MGPP was reasonable, and that an SEIS was not required in connection with the MGPP. This claim reflects no small audacity, in light of the court’s prior findings as to the ESDC’s review process. These findings included what the court characterized as the ESDC’s “deplorable lack of transparency” in failing even to mention the MTA renegotiated agreement by name in discussing changes the agreement made in the deadlines for completion of the Project; the ESDC’s continuing lack of transparency and failure to meet its obligation to bring the Development Agreement to the court’s attention in order to correct “totally incomplete representations’’ made in opposition to the Article 78 petitions regarding such deadlines; and, upon remand, the ESDC’s performance of a wholly “perfunctory” analysis of the environmental impacts of a build-out of the Project that was potentially more than doubled under the MTA and Development Agreements. This is not a case in which the ESDC’s determinations were substantially justified.
How to determine fees

Friedman ordered that a special referee evaluate fees:
However, further briefing is required on the standards specifically applicable to the EAJA for calculating fees - e.g., whether the lodestar or other method should be used; whether petitioners are entitled to fees for the appeal and for the instant motion; and whether fees are recoverable under the EAJA at prevailing market rates, notwithstanding that petitioners’ counsel charged petitioners reduced rates based on their not-for-profit status.
Here's an explanation of the lodestar method.

At the hearing

At the hearing last December, ESDC attorney Karmel argued that the agency was "substantially justified"--albeit ultimately unsuccessful--in arguing it could rationally conclude that the worst impacts of the Atlantic Yards buildout would come in a concentrated ten-year construction period, rather than a potential 25-year buildout, which extend attenuated impacts.

Thus, the ESDC chose to not conduct a requested SEIS.

Butzel, the attorney for the BrooklynSpeaks coalition, told Friedman that, when the ESDC in 2009 re-approved the project and assumed it would take ten years, that "flew in the face of the realities of the market," and was contradicted by a public comment by then-ESDC CEO Marisa Lago, who said Atlantic Yards would take "decades."

"Why was it done?" Butzel asked rhetorically. "I believe it was so ESDC could avoid having to prepare a SEIS," a process that would have delayed approval of the project past a crucial end-of-2009 deadline to have tax-exempt bonds issued to finance the arena.

"In August 2009, ESDC fabricated the position that the project could be completed in ten years," Butzel said. He didn't mention the KPMG report that Karmel said in June 2010 that was "probably the most important factor" in the ESDC’s decision to assume a ten-year buildout. (I've identified blatant lies in the KPMG report.)

"If ESDC had been more honest, or counsel had been more forthcoming, the arena construction would not have started by the time of the first decision," Butzel contended.

Last December, I judged his statement murky; while there was site preparation, the formal arena groundbreaking in March 2010 came just after Friedman's first decision

It's now somewhat less murky; now we know that the judge agrees that construction might not have started.

Ends justify the means?

John Brennan of The Record wrote:
The Barclays Center has proven to be a hit in terms of architecture, job creation, and even being less of an imposition on an existing neighborhood than expected, in many respects. And like the Prudential Center in Newark, it likely has helped fuel already-existing interest in further developing the surrounding area.
So do Nets and Forest City Ratner representatives have an attitude of “the ends justified the means?” Probably, and others will no doubt agree. And we’re not going to tell you how to feel about that.
My response:
Arena's not a hit in terms of "job creation" until we know how many hours and how much pay the workers get--and they've been silent on that. Also, there's been tons of turnover. Hiring a bunch of people for low-paid, part-time jobs does not represent the transformation that was promised.
As for being less of an imposition than feared, yes, but that doesn't make it a "hit." it means that people closest remain quite vigilant and frequently frustrated.
But you're right about ends justify the means. Ratner last year said that, ultimately, "No one will care what we had to do to make it happen.”